Despite the furor over government job cuts, tariff chaos, and what not.
By Wolf Richter for WOLF STREET.
The labor market accelerated in March, after the moderate growth in January and February, despite the job reductions at the federal government, despite the chaos and uncertainty on trade, despite the sour mood of consumers that nevertheless spent like drunken sailors on new vehicles in Q1, despite all the things in the media to scare the bejesus out of everyone.
Total nonfarm payrolls in March jumped by 228,000 from the prior month, blowing past an entire range of projections, to 159.4 million, according to the Bureau of Labor Statistics today (blue columns in the chart).
The three-month average job creation, which includes the revisions and irons out some of the month-to-month squiggles, declined to 152,000 jobs, which is in solid territory (red line).
Civilian employment at the federal government – which accounts for less than 1.9% of total nonfarm payrolls – dipped in March by 4,000 to 3.0 million workers, after having declined by 11,000 in the prior month, bringing the two-month decline to 15,000.
This doesn’t yet capture the full effects of the job cuts so far: Workers on paid leave or receiving severance pay are counted as employed until they stop being paid, the BLS pointed out.
This relatively low ratio of federal government payrolls (3.0 million) to total nonfarm payrolls (159.2 million) indicates that the job cuts at the federal government, once they show up to the full extent, won’t make a major dent in overall employment.
This does not include employees working for companies that have contracts with the government. Their employees fall under the various nongovernment categories, such as “Professional and business services,” where employment has actually increased over the past two months despite some layoffs at big government contractors.
In March, this ratio of civilian government employment to total nonfarm payrolls dipped to 1.89%:
Average hourly earnings rose by 0.25% in March from February (+3.0% annualized), a slight acceleration from February but a deceleration from the hot increase in January of 0.42% (5.2% annualized).
The three-month average rose by 3.6% annualized, a slight acceleration from the prior month (red line).
Year-over-year, average hourly earnings rose by 3.8% in March, after having increased in the 4.0% range in the prior three months.
Unemployment ticked up by 31,000 to 7.08 million people who were actively looking for a job during the survey period, according to the BLS household survey today. Unemployment has been in this range since July.
The three-month average rose by 66,000 to 6.99 million and has also been in this range since July (red)
The headline unemployment rate (U-3) edged up to 4.152% (rounded to 4.2%) in March from 4.139% (rounded to 4.1%) in February. The actual increase of 1.3 basis points ended up looking like a 10-basis-point increase due to the effect of rounding.
Over the past 10 months, the unemployment rate has stabilized at the historically low range of 4.0% to 4.2%, with July having been the high point (4.22%) and January the low point (4.01%).
The unemployment rate = number of unemployed people who are actively looking for a job divided by the labor force (number of working people plus the number of people who are actively looking for work).
An unemployment rate of 4.2% is historically low, and a sign of a solid labor market, and below the Fed’s median projection at the March meeting of 4.4% for the end of 2025:
The Fed faces a peculiar mix of a solid labor market, inflation that has been accelerating for six months, uneven economic growth, and tariff chaos that it fears may add to persistent inflation as businesses and consumers expect higher prices in future years, thereby adjusting to higher prices – the “inflationary mindset,” as I call it – causing inflation expectations to become “unanchored,” which is one of the ingredients thought to allow higher inflation to fester. So Powell was fairly hawkish today, focused on inflation. And in this scenario, it seems markets may have to learn to stand on their own two feet?
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Thank you for a cogent post. People somehow think they are entitled to asset price inflation at all costs. Tiring.
Precisely — the endless discussion of various “puts” on the equity markets in particular is ridiculous. Knightian uncertainty is unavoidable — deal with it …
Just fine today. They’ll revise it much lower in 3 months when no one is paying attention anymore. Ministry of magic.
Three-month averages include all revisions. Always have, always will. So it doesn’t matter if you look at the three-month average.
There have also been up-revisions, for example, two big up-revisions in December and two big up-revisions in February for the nonfarm payroll increases; and a HUGE up-revision in overall employment in February.
But up-revisions don’t fit your narrative, so you don’t read them, and if you accidentally see them, you try to unsee them asap so that they don’t clutter up your mind.
I’m just commenting on todays surprising number that came the day after March set the third highest layoffs of all time, only surpassed by two months in early covid. They do consistently revise them, a lot more than before and I believe today will be no different, and likely an indicator of a weaker job market to come.
“…the day after March set the third highest layoffs of all time,”
what are you talking about? Are you adding in all the grandiose announcements on X about how many government employees they are going to try to maybe lay off by quadruple-counting everything?
2000 points down! Yay!!
On top of 1400 down yesterday. Yay!!
If you only someone could have seen this coming 😃
2 or 3 trading days. The Dow is 38,000, 3400 is not even 10 pct. Still in the range of noise. It will be more telling if he have 50 points daily down for the next 20 or 30 days. That would tell use something. I’m not sure these seemingly big moves in points is anything more than drama.
I am surprised at BTC which has held up pretty well and is even green today. What does that say ? Anything ? Of course its down 17 or 18% from it’s highs a few weeks ago so maybe it says nothing.
If employment holds up then nothing really bad is happening.
If you think 10% loss is noise, I have some investment opportunities to sell you.
10% loss in 2 trading sessions may not tell us anything especially in the days of algorithms and automated trading. Weeks or months of persistent down tells us something.
I don’t buy investments from people trying to sell me.
If you think 10% down is serious, don’t read John Hussman’s musings on what it needs to go down to be back to normal.
We’re on the way to a bear market, or a 20% down from peak. Not quite there yet but it’s probably coming. Historically, they happen about once every 3.6 years.
I have to disagree with the suggestion that this is “noise”. If there is any solace, this one seemed inevitable from a CAPE perspective. That doesn’t excuse the unforced policy error. The last thing any politician should want is eating a bear market that can be tied to a policy choice.
As far as gyrations of Bitcoin…I side with it says nothing to a prudent investor. The asset class usually correlates with another irrationally valued asset class, tech, so it’s probably just dumb money shifting chairs on the Titanic until they get got. Just like I don’t read much into GME up today. Dumb money gotta dumb until the market relieves them of the burden of having assets.
S&P is at 17% below the high of less than two months ago, so almost identical to BTC. However, because recent gains have been so large, the S&P is now where we were just 14 months ago.
A ~20% drop happens every 5 years of so, so surprisingly routine and not really a cause for concern. Many of those stopped at 20-25% and weren’t too catastrophic. Once it passes 33% or so, then more widespread damage starts to hit (1929, 1932, 1938, 1968, 1974, 2000, 2008)
Don’t worry none, Andy. The shorts saw this coming and are making $$$$$$$$$$.
The recent stock price drop simply rubbed out the undeserved gains of the past year (the election bump), which matters primarily to the top 10% of wealth holders. So what, who cares.
The crying we hear is coming from Wall Street and its shills, not Main Street.
The S&P 500 is about back where it was a year ago. Who promised 20% returns every year, year-after year? Being flat for a year is a nothingburger. Try being flat for 40 years, such as the Nikkei had done, and now they fell off the wagon again. To be flat for two years, the S&P 500 would have to drop another 20% from here. And that’s just two years of gains unwound.
During the Dotcom Bust, the Nasdaq Composite plunged 78%, and it took 15 years and lots of money printing to get back to the level of March 2000.
People have gotten completely spoiled by these years of massive gains that drove lots of stocks to ridiculous levels.
Agree. Stock market is massively overvalued vs multi-decade, even multi-century norms. This is the trigger to the fall in stock prices but not the cause of it.
Here’s hoping home prices start falling somehow too as this family is still renting after moving states a few years ago because of outrageous inflation in homes way beyond rent inflation or income inflation.
I believe the outrage stems from the sense that these particular losses are unnecessary.
You have posted quite a bit about how you think tariffs are probably useful for the US economy as a whole, but I’m curious about your opinion on the broad based, large tariffs for everyone strategy being employed here.
There is certainly such a thing as too much of a good thing.
I just had this discussion with a guy in France: If you want to buy a base V-8 Mustang GT Fastback in France, it will cost you €126,000, or about $141,000, including tariffs, taxes, fees, and malus. That is prohibitively expensive. In the US, they’re $46,000.
We’re in an “inflationary environment” in which companies are able to increase prices and somehow buyers are able to pay.
I think Wolf’s mindset is colored by his experience as a vendor, and the understanding that a vendor can’t simply charge what he wants to achieve the profit margin he seeks. He can only charge what the market will bear.
I think the concern might be that tariffs in an inflationary environment will boost prices and customers will be willing to pay those prices.
“The Dow Jones Industrial Average bottomed out on July 8, 1932, at 41.22, an 89% decline from its peak on September 3, 1929. “
And it is possible this could be a 3 year grinding bear market.
Yeah, I am hoping to get opportunities to take on more risk between 4800 and 4300 on the S&P — otherwise I am keeping a relatively large cash position, thanks …
I love the Nikkei. The great counterargument to the dumb argument that you just hold US equities, you’ll for sure make money!
It can happen anywhere, just less likely to the US because it has such a huge market cap relative to its peers. But, yes, here too. That’s what you sign up for when you invest in equities.
I’ve always been a dick. I can’t help it. Generally I try and stay away from these discussions. I have challenged many online economists. Stocks at what price compared to monetary expansion? So money is printed, and makes everything more expensive. Including stocks. Nothing is really changing. If money continues to manifest itself somewhere, then, somewhere it will go. It’s like we all wish a soda cost 50 cents again.
Btw, anyone know what Ackman is doing? Wonder if he is loading up on stock now just like when we are middle of Covid, take advantage of these buying opportunities
I imagine he is raising cash. His timing may depend on whether he got a good read on our current administration.
Go look at his latest 13F. After that he announced a sizeable position in Uber.
2000+ and counting, although likely it will recover some before market close….where’s my FOMO peeps at? This is like once in a lifetime buy the dip moment, last time it was during Covid, don’t miss this golden opportunity before market hop back on the rocket to the moon. Guess the PPT time must be on an extended vacation or competely passed over at the bar…let’s get back to work by next week ok?
Btw, the labor market might be fine and all from data perspective but you know what they say…it’s a recession when your neighbor lose their job but it’s a depression when you it’s your turn. Definitely got a first hand experience on that as my wife got the laid off yesterday, how timely right after libration day…guess she got librated from her job too, although I am sure it was planned well behind this tariff annoucement, doesn’t make it easier…
Howdy Phoenix. Wait a little longer before you buy the dip. The Balanced Budget Battle Dip or NOT Balanced Budget Dip is coming……
Sorry to hear about the layoff – as a general rule, stuff like that really sucks.
Sorry to hear your wife got laid off. That sucks, but at least she can collect unemployment for a while.
Howdy Youngins. You should have expected a market correction, Buffett did. What about the novel idea, like hey, lets make a lot of our own stuff we buy and enjoy. I am already thinking about what I want to purchase next. Now only if I can find something made in America. Could be a Tesla since I heard about the fire sales on them……..
Sober Sailor
We pretend to work and they pretend to pay us
“Year-over-year, average hourly earnings rose by 3.8% in March, after having increased in the 4.0% range in the prior three months.”
That’s a good thing.
“And in this scenario, it seems markets may have to learn to stand on their own two feet?”
First they have to land. Right now the FOMO’s are still searching for the parachute release handle.
I’m interested in the FOMO crowd of business chiefs willing to invest multi-year to re-shore, given Fearless Leader’s consistency in edicts, even intra-day.
Here’s how it works. They make big “commitments” to please Dear Leader.
Dear Leader then runs to social media to brag about the GREAT WIN for America, with the commitment exaggerated by a factor between 2 and 5.
Then business leader goes on about business as usual, and will make good on some, all, or none of that commitment if it suits the company.
1. I dont want to start a problem or something. But I have a few doubts regarding the recent sell off
2. How low it will go? Just an educated guess, I am trying to time the market approximately. Like until Powell starts rate cuts or rates goes to zero?
3. What stocks are good to buy if the stocks go lower or when the rates are back to zero?
4. My idea is to buy some index funds like VHYAX or some dividend index
5. May be good stocks like GE, F, MPC or XOM, BAC and hold it longer
6. Will it be a Stagflation like 70-80s?
7. My comment might look stupid but not really politically motivated. I am all about Benjamin Franklin.
Cobalt Programmer:
I can tell you one method that is pretty much guaranteed to work. I started adult life with zero and i do mean zero. 10% of every piece of revenue was set aside for the future. first in a savings account until I had enough for mutual fund purchases. I did it decade after decade. Never failing-never selling. Today I would use EFTs. Today I am stinking rich. I do not know of a way to get rich quick but what I described is one way to significant wealth accumulation.
You’re assumption of zero rates coming back is problematic to you making any Benjamins
Cobalt, no one can predict the future. The safest bet is cash. It was a long wait before we saw 3.5-4% returns.
The bet with the biggest potential payout over a decade is equities. What equities? No one knows. The bet with the biggest losses is equities.
Here’s what I’m doing. Nothing. But I’ve always planned for a bear market with a healthy amount of cash – and this isn’t my first rodeo with a potential recession. I went to this position during the first administration and did the same for the second. I dunno, just felt like might as well take some risk off considering this one historically BKs, so might not be good at his job.
When I was younger, I was all in on S&P 500 right before the GR. Didn’t sell a penny, ultimately vindicated, but learned an important lesson. Bonds and cash are cool too!
The stock markets were way overpriced anyway. Now we can only hope house prices crashed even more so they can be affordable again. No tears for Wall St or speculators. I play the long term game and will buy when prices are reasonable again.
401K pension owners had no control over their investments–you throwing them under the ‘no tears’ bus too? Who is making out like bandits? That is the question. There will be no clawing back of that ill-gotten gain, as usual.
I hope we all get wage inflation, personally. We call those raises.
Doesn’t look likely. But no harm in hoping the tight labor policy gets tighter, as it’s a rough time to be a reseller of another country’s goods.
I’m positioning on a medium-ish to rough recession with a flat to mildly negative impact on housing. I think our trade policy is bonkers, so it’s likely that we see more layoffs than hires.
A note about housing – people thought they were the “safe” investment after coming out of the dotcom crash so whatever happens depends on whether people can cover their mortgage payments.
It’s a good time to buy stock in E.U.-based defense companies. Few people are going to buy US manufactured weapons systems moving forward – why give the US more leverage to extract concessions?
They’re steeply priced now. You’re late to that game.
Question: who made the decision to close the NYSE after 911 for a week? Could it happen again if orderly trading ceases to exist.
The World Trade Center towers got hit before markets opened, and their destruction damaged the infrastructure and telecommunications links that markets need to operate, and so markets could not open.
“The Sept. 11 attack shut the stock market for nearly a week and revealed its vulnerability to physical destruction. While the NYSE building wasn’t damaged, many communications links were severed by the fall of the two trade towers. And the reopening of the NYSE was hampered by the Ground Zero recovery operation nearby.”
https://www.investopedia.com/financial-edge/0911/how-september-11-affected-the-u.s.-stock-market.aspx
Swamp, there are circuit-breakers for pausing markets, but nothing beyond that. But knowing how this administration works, under emergency powers I could see an executive order to halt trading. Bad idea, though. The breakers would achieve the same thing. The SEC could also ban short selling. Did that before for bank stocks.
Did Powell just kill the “Fed Put”?
If so, FINALLY! And good riddance.
NO
Wolf, The fear is people losing money in their 401k and start cutting back on spending and that leads businesses to layoff and thus recession follows.
Yes, I said that too. But last time this happened (2001), it took 1.5 years of stock market rout before the recession kicked in. The recession came and went in the middle of the 2.5-year Dotcom Bust.
https://wolfstreet.com/2025/03/14/will-economic-detox-lead-to-a-recession-maybe-not-but-a-long-deep-stock-market-rout-will-see-dotcom-bust/
But what percent of Americans were invested in stocks during those years and what percent of their net worth was invested? Much higher now I’m sure.
Can’t count how many times today I heard it always comes back.
Sheep to the slaughter.
Aren’t we likely to see bigly labor market deterioration later in the year?
1. NVDA, AAPL, other tech darlings have crashed and their margins will be hit hard by tariffs. Capex will get slashed. Layoffs or at least hiring freezes are a-coming.
2. The hospitality/leisure will probably get hit hard too, as consumers face shock price increases and deteriorating real incomes due to tariffs on consumer goods like electronics and appliances.
3. Continued government cuts – we have the RIFs yet to hit; as Wolf points out a lot of folks are on admin leave or taking the buyouts, which means they will collect a paycheck until September.
3.
At some point, if the stock market continues to plunge, it’s going to trigger a recession. But it would take a much bigger drop than what we have now:
https://wolfstreet.com/2025/03/14/will-economic-detox-lead-to-a-recession-maybe-not-but-a-long-deep-stock-market-rout-will-see-dotcom-bust/
Translation: The Fed will not bail out anything that happens for the next 12 months. They’ll be hit with a combo of inflation and aggregate demand destruction.
The Fed put is gone.
You mean….the Plunge Protection Team (PPT)….is….gone???
Long-term rate is dropping, not raising. That’s a market signal that inflation is not a thing.
It could also be a flight to safety.
Or inflation is the old thing and depression is the new thing.
So many people’s 401Ks ruined! But, they can still work some shit job and keep getting taxed!
How many of these ‘profit-taking’ episodes have I lived through, starting when we went off the gold standard? Ain’t capitalism great though.
Fortunately for me I bailed out many years ago.
Long time no see, Wolf, see you haven’t changed.
It will be nice to see an economic system that evolves past capitalism. I am sure people said fuedalism would never be replaced either. These things take time usually but as the popular expression goes “There are decades where nothing happens; and there are weeks where decades happen.” For now it appears nation state conflicts are the path taken but natural to pick an enemy rather than pick a better path.
Capitalism is economic freedom, the greatest single economic development in human history, the so called alternatives are all despotic human enslavement machines. And you can have Capitalism and a robust social safety network, the two are not incompatible.
Thanks for the sober analysis. Markets have been frothy for quite some time with PE ratios way above historical norms. Anyone who has run a private business and wants to make money wouldn’t want their profit to be be less than 4% which is a PE of 25 and equivalent to current interest rates. A PE ratio of less than 10 should be the goal! Seriously, why would anyone put in the effort for so little return? It’s clear our collective math skills are lacking.
The markets are NOT a one-way street. You gotta jump on the highway baby where there are 3 or 4 lanes going both ways. You’ll get there faster. You can stay in the green regardless of if the Nasdaq or the Dow Jones are overall in the red. Look at it like boxing… when there’s heavyweights getting knocked down or KO’d there is always a bantamweight on that same card flexing his muscles. Microsoft, Apple, Google, Berkshire, Amazon, Nvidia, Tesla etc are the heavyweights but dont forget in that same ring on that same day its gonna be a lightweight like VXX, UVXY, VIXY, or DUST out there winning. Soon I’m gonna include a tip jar for saving a shirt or two that would’ve been lost due to obliviousness 🤣
I have to keep reminding myself that for every share of stock SOLD by someone it is being BOUGHT by someone else.
What do the buyers know or think?
BTFD
Yeah….Catch the Falling Knife.
CTFN. 😬
Ran out of money for buying the dip so often. Maybe I’ll get a cash advance from my credit card to buy more!
The media doesn’t understand the impact of DOGE cuts. While 20 to 25% of employees are being cut out of 2,000,000, 35% of contractors are being cut out of 20,000,000. The cuts to contractors will be felt more immediately. Existing contracts can be cut with one email from a contracting officer. The termination of employees is a slow process with severance delaying the hit to unemployment. Large and small companies are already cutting bench time and severance because declining revenue can’t support it. 80% of federal employees and contractors live outside the Washington metro area.
Are we in what could be Awful April, or will this end up turning into Terrible Twenties?? ❓
Well, capital gains revenue for 2025 should be solid if this continues. There is a positive in that.
The problem is that it takes time for firings in private sector to filter through. It is happening but not showing up in the data yet. I will bet you Wolf that a very different picture emerged by end of April
Soon to be posted at the top of all of Wolf’s articles: “If you have a BRAIN, EXIT NOW.
Only zombies welcome.”
We’re going to get a big rally, and people will feel good again, until the next leg down hits them.
The markets are still far overvalued and looking for reason to correct.
Blame whatever you want, but this is all good and there was and still is plenty of warnings.
If you look at the august low and fridays low it’s the same. August was the start of the Trump Bump. Friday was the Trump Dump. Markets went up on the hope and promise of deregulation and tax cuts. And then oops. So far all that is lost is this last parabolic run up that had nothing to do with fundamentals.
I think one thing that is underappreciated (or misunderstood by me!) is that Trump probably has a limited window to get a “win”. Congress can vote to strip the presidency of his emergency authority anytime they choose and then it’s done because Article II.
Of course, right now everyone in R-land is playing nice because the party in power wants those tax cuts. After that, I think the clock starts ticking as only the safest seats want to risk going into a midterm during a recession.
I remember in 2001, market crashed first and unemployment came later. Same for 2008. Unemployment rate is a lagging indicator of a recession. Also, once it jumps, it goes up fast.
Unemployment is not a lagging indicator of a recession. A recession is defined in the US as a widespread economic decline and a declining labor market. You gotta have both.
But a big stock market crash or housing crash will CAUSE a recession. That recession starts with frazzled big spenders cutting back spending, including at the companies they own/run, and then when jobs get cut enough, that’s the recession. This happened about 1 year into the Dotcom bust. And after the recession was over, the dotcom bust continued for another year. It was mostly no recession outside of the tech areas and a depression in the SF Bay Area and some other tech areas.
Two random employment comments:
1) hiring of software people in the Seattle market is dead. I’m guessing it’s not that much better elsewhere though I don’t really know. Anecdotally I was told by a soon graduating SW student his jobs professor told him to expect a very rough job hunt.
2) (I used to be in the staffing industry — 25+ years). The ASA staffing index has been trending down annually for the past couple of years. You can find it by searching “American Staffing Association Index”. It’s basically the demand for temp labor. The higher the number, the greater the demand. Temps are often the first ones in during an expansion (while employers try to discern if growth is real) and the first ones out as supplemental staffing gets cut before f/t hires. (Though that is not always the case, obviously). This slowing of demand often precedes a slowing of the economy. It’s not foolproof, just another metric.